Studies: Ensign Map

"Can the markets be predicted?"   That is a century old question.   The 1900 Ph.D. thesis dissertation of Louis Bachelier, in Paris, argued the apparent erratic motion of stock market prices is identical to random walks.   The 1965 work of Nobel prize winner Paul Samuelson proved that prices fluctuate randomly.   While the bias of academia is towards markets being efficient, completely random and unpredictable, it appears that most traders believe otherwise.   Traders see market behavior and price patterns that are repeatable, which therefore offer an element of being predictable.

Larry Pesavento, a well know trader and author, has been a long time proponent that market behavior can be predicted.   The titles of some of his books are: 'Astro-Cycles: The Trader's Viewpoint', 'Fibonacci Ratios with Pattern Recognition', and 'Profitable Patterns for Stock Trading'.   The last mentioned book has a chapter titled 'The Non Random Nature of Chaos Theory' which discusses his involvement in an area of research using Neural Networks to forecast the next day's price action.   Read more » Neural Nets.   Read more » Larry Pesavento's trading style.

I believe the markets can be predicted.   Market behavior has often been compared to waves because of the inherent characteristics of amplitude and periodicity.   Market technicians have used   Fibonacci   retracement and extension tools to measure and predict amplitude fluctuations.  The   Pesavento Patterns   tool was developed for Larry Pesavento to quickly find the swings in the price action and label the amplitude ratio relationships.   Cycle   tools have been used to measure and predict periodicity.   A powerful tool that is predictive of both price and time is the   Pyrapoint   tool. 

Possibly the most original predictive tool in recent years to be made commercially available is the Ensign Map tool found only in the Ensign Windows charting software.   The Ensign Map tool analyses enormous amounts of market data to make a probable forecast of future market behavior.    The tool incorporates the characteristics of both amplitude and periodicity to forecast future price action.   That is a monumental objective, and the Map tool does an exceptional job.

The Ensign Map needs lots of back data in order to make a useful prediction.   The tool is designed to recognize patterns and learn market characteristics for both vertical price fluctuations and the timing of swing turning points.   Time of day is an important consideration since behavior at market open is used to predict opening behavior.   Mid-day behavior is used to make a mid-day forecast.   Behavior at market close is used to predict market closing patterns.   In order to see sufficient pattern detail, it is recommended that the tool be applied to 2-minute bars up to 5-minute bars.  A large time frame bar like 60-minutes is inappropriate because there is hardly any pattern in just 6 hourly bars per day.   Some users have applied the Map tool to constant tick bar charts with success, but the variable nature of the time period covered by constant tick bars diminishes the precision of the Time characteristic that the tool is analyzing.

Market Open Forecast
Recalculate the Map at the end of the day session.   The Map that shows on the chart will have very high correlation to the chart because it has the benefit of hindsight.   The data showing on the chart and all prior days off the left side of the chart is known information, and is used to make the forecast for tomorrow's opening behavior.

The forecast is for the market to move higher in the first couple hours of the trading session.   Here is what actually happened.

The market started higher, but then sputtered sideways in a 3 point trading range.   This is hardly fulfilling the previous day's forecast for the market to move upward to the 1069 price area. 

Mid-day Forecast
Now that new information about the actual open is known, it is time to make a new forecast for the mid-day.   The Map is recalculated manually by pressing the equal sign key. 

The Map has been resized in its amplitude by pressing the Shift Left Arrow or Shift Right Arrow keys.   Then it was repositioned vertically so it nicely overlays the chart's bar pattern as shown.   The Map is positioned vertically by using the Shift Up Arrow or Shift Down Arrow keys.   The forecast is for another couple hours of sideways choppy action.   This is what developed through the mid-day.

Late Afternoon and Closing Forecast
A couple more hours of price action describing today is known.  It is time to make an update of the forecast to predict how the market will behave for the balance of the afternoon and into the close.   The equal sign key is pressed to recalculate the Map.   The new Map is resized and repositioned to overlay the chart bars nicely.   The forecast for the balance of the day is for more sideways action near the high of the day.

This is how the market actually closed.   The market rallied to the 1069 price after all.

Summary
The Ensign Map is a forecast based on probability, not certainty.   The examples illustrate how the Map is used.   Note that the time of the forecast is shown on the chart in the top left corner.   The time stamps tells when the Map calculation was made.   Data ahead of this time stamp is known information.   Bars shown on the chart after the time stamp show how the market developed in comparison to the forecast.

The examples shown in this article not particularly impressive.   Perhaps it is better that way lest hand picked stellar examples give a false expectation about what the Map can do.   Some forecasts are truly phenomenal, however, such as this forecast made at 11:56 on December 3rd for the market to sell off in the afternoon and close on the low of the day.   This Map when sized to fit the bars ahead of 11:56 made an exceptional forecast of the market's closing price.

Here is another excellent example of a Map calculated at 12:28 on December 9th forecasting the market to trade lower in the afternoon and close slightly off of the low of the day.   The chart shows how the afternoon behavior developed.   Again there is good correlation between the forecast and the actual, and the price where the market closed.

The Ensign Map is good for all symbols and all charts. And surprisingly, it is amazingly good on constant tick, constant range, and constant volume charts where the bars have a variable time period. These charts still have patterns and rhythms, and the principles still work.   The idea is to have enough bars per day to have detail in the patterns.   On a fixed time bar, a 2-min time period is recommended.

Additional Reading
1) www.dacharts.org/archives/Ensign_Wed_class_transcripts/FXCM_data_rating_Pesavento_map.htm
2) Larry Pesavento
3) Price and Time

Rating
Normal and Inverted fit, separated by dot.
20-10 good fit, 9-0 poor fit.
24 is possible but rare.
10: transition between good and poor.
Rating is as of rightmost bar.
Rating is based on visible bars.
Rating changes as rightmost bar scrolls.
Rating is only for the rightmost day displayed.
If view shows a day boundary (map spans two dates) the rating resets to zero at the day boundary.

Spread
Higher spread between Normal and Inverted = better fit.
Spread example:
19.0 spread of 19-0 = 19 indicates more strength.
12.10 spread of 2 indicates less strength.
Recalculate if spread is low.
Low on sideways narrow range days.

Time
Specifies current time (should it be time of bar that was farthest right when map was calculated?).

Equal Weights
Unchecked gives recent patterns a higher weighting in evaluations.

Lock Shift 
Unchecked allows shifting the Map to align swings.

Calculating the Map

1. For next day, calculate map at end of current day's session.
2. For today, position chart so last bar on chart is through yesterday, calculate map, then drag chart to left to show the map for today based on yesterday.
3. Bars that are off the right side of the chart are not included in the Map calculation.
4. Often times the initial calculation may be out of phase briefly but the actual and the map are decently good, so keep it, and the actual rejoins the Map for a great correlation.

Recalculating the Map

1. After one hour (30 bars on 2-min chart) into today's session, or after midnight if using both sessions, consider recalculating if the fit is not good.
2. Recalculating before having 30 bars might be too little data or pattern to consider. Try to avoid recalculation to avoid the challenge.  If too quick to recalculate, it might improve on the current phase, only to drift out of correlation in the near future.
3. Part of the genius of the Map is rhythms, or cycle widths, and it measures time.   If the cycle is, say 90 minutes, then aligning Map's last swing point with actual swing point, now improves on the 90 minute timing for the next swing point.  The drift was in the alignment of the swing point, and not in the width of the cycle found.

Price Preparation (Pesavento)

Example
If price descending, but slightly above the 1.27 level, and it is time (within 15m) for the market to change, place an order to enter at 1.27 level price, stop a few ticks/pips lower. Wait for time of next turn, and possibly raise stop to breakeven.

Q:   I was told by your software support staff you are the developer of the indicator Ensign Map.   I want to know whether we can get two different colors or some other markers to differentiate between what portion of the map "already occurred" and what part represents "projection".  I was analyzing this indicator for over sometime and I like this indicator.  After a week of printing the maps for several currency pairs and going back looking at what happened, I was amazed it indicated the directions correctly most of the time.  However, I am unable to use it for successful trading.  My problem has been to accurately judge where we are at right now.  Because, it often throws a coiled spring type map in the middle with the magnitude distorted to a great degree.  It is difficult to manually align and be confident of current location.  A few times my stop losses were hit, because I aligned it wrongly over similar curves, which appear frequently.  The map also makes it difficult to guess what stop loss is needed.  If I have two different colors, then I can monitor the progression of the map by recalculating it over a period of time, convince myself it shows the right direction, and make sure I reached the top/bottom of the curve, and then enter the trade with comfortable placement of stop loss. I believe this will be a very good indicator in combination with other indicators.

I also like to know what keys on the keyboard can be used to control the map.  I found more keys like '<' '> ' which moves the map.   However, these are not mentioned in your video or on your website.

A:   On the Map property form check the box for Show Title.



This will add the title in the top left which shows the time when the Map was calculated. Ahead of this time is known material and after this time is the forecast material.

When the chart scale is showing the comma and period key will shift the map 1 bar either direction per key press. Dragging vertically in the chart scale will resize the host chart.

Double click on the chart scale to change to the Map scale, and then a drag vertically on the scale will resize the map, and dragging on the chart background will move the Map instead of the chart.  Double click the chart scale again to return to the chart scale mode showing.

The Map's primary purpose is a timing tool, and 2nd a direction tool. Because it is scalable, it is not well suited for being a price level tool for picking a stop level.

watch video » Ensign Map
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